This blog is all about economic and financial events happening in Mongolia.

Wednesday, February 12, 2014

Mongolia pushing North Korean ties

Mongolia on February 7 ratified a raft of deals to increase economic ties with North Korea. The agreement is part of an ongoing push by Ulaanbataar's to boost cooperation with the isolated state.

Under the agreement given approval by the Mongolian government, the two countries will increase their economic ties, with a focus on industry and agriculture, state news agency Montsame reports. Mongolia will help North Korea develop livestock husbandry, while Pyongyang will offer assistance in setting up industries utiltising Mongolia's raw materials, such as wool and coal.

The deal was initially signed during Mongolia Industry and Agriculture Minister Battulga Khaltmaa's visit to Pyongyang in October. The Central Asian state eyes its reclusive neighbour as an aid to improving energy security and diversifying market reach for its growing mining output.

According to the Mongolian presidential website, agreements were signed on cooperation in the roads and transport sector, as well as culture, sport and tourism. A 2013-15 cooperation plan between the Postal Authority of Mongolia and the North Korean Computer and ICT Centre was also agreed.

Mongolia has relatively good relations with the pariah state, given the two countries' shared communist history, and Mongolia has often supplied food aid to North Korea in recent years. Meanwhile, somewhat ironically, it's the potential access to international markets that cooperation with the closed-off country could offer that is enticing Ulaanbataar.

Mongolia, which is increasing production of coal, copper and other commodities, has expressed an interest in gaining access to North Korea's ports. The two countries are already linked by a rail line connecting Mongolia to the port of Rason.

Last year, Mongolian oil trading and processing company HBOil acquired a 20% stake in the operator of North Korea's Sungri refinery. HBOil will supply crude oil to the refinery for processing, then re-import the products.

Officials involved in the HBOil deal told bne in July that access to international shipping lanes via North Korea could soon expand. That would offer Mongolia's growing minerals output reach to new markets. Currently China consumes more than 90% of the country's mineral exports, but with the Asian giant's growth slowing, access to Japan, South Korea and India would hedge Mongolia's risks.

Therefore, alongside growing ties to the North, Ulaanbataar is also looking to build its relations with South Korea. Foreign Minister Luvsanvandan Bold plans to pay an official visit to Seoul on February 12-14.